Australia’s strong economic performance and fiscal management continues to be amongst the best in the developed world. The 2005‑06 Budget puts in place major initiatives to sustain this performance, including further income tax cuts and welfare to work reforms, while maintaining strong budget surpluses over the next four years. These initiatives will boost participation in the workforce and increase the productive capacity of the economy over time, thereby enhancing Australia’s growth prospects and its capacity to deal with future demographic pressures in a sustainable way.

In this budget the Government will introduce personal income tax cuts worth $21.7 billion over four years, improving the incentives for all Australian taxpayers to participate in the workforce. The superannuation surcharge will be abolished at a cost of $2.5 billion over four years, increasing incentives to save and boosting retirement incomes.

Substantive reform of the income support system for people of workforce age will encourage greater workforce participation by those with capacity to work. Obligations to look for work will be applied to a wider range of people, the payment structure will be altered to encourage participation and extra services will be provided to help people to prepare for and stay in work.

The Government will abolish the Tariff Concession Scheme, at a cost of $1.25 billion over four years, as well as provide other business tax relief aimed at enhancing business investment and Australia’s international competitiveness.

This budget also includes measures to address the fiscal sustainability of the health system, particularly through changes to the Medicare Safety Net and the Pharmaceutical Benefits Scheme.

The Australian economy is forecast to continue to grow solidly, with GDP growth forecast to strengthen from around 2 per cent in 2004‑05 to 3 per cent in 2005-06. With unemployment at a 28-year low, the economy is set to deliver sustained improvements in Australia’s economic wellbeing.

Having met the need for spending in priority areas, an underlying cash surplus of $8.9 billion is expected in 2005-06, with further surpluses projected for the 3 years following.